As many of you may have heard, effective with FHA Case Numbers issued on or after October 15, 2019, lenders will have the ability to approve an FHA mortgage for a condominium in a project that is not on FHA’s Approved Condominium list.
To those who have been around long enough to remember FHA’s old Spot Condominium Approval Process… they have NOT revived that program. This program requires the project must meet most all of FHA’s Condominium requirements and documentation guidelines for submitting to FHA for HRAP approval (AKA the Standard Program). Two differences are, the project will be evaluated by VanDyk staff instead of HUD, AND the Single Unit program has additional restrictions and documentation requirements.
Below, please find the guidelines from the 4000.1 for Single Unit Approval along with the Single Unit Questionnaire created by FHA. Also attached is the guidance for projects already on FHA’s approved list, Standard Condominium Approval Guidelines (provided mainly to show the situations when units require no approval).
FHA CASE NUMBER: Mortgagee Letter 2019-13 FHA obtaining case numbers for single unit condo approval contains the instructions for obtaining the FHA Case Number. On FHA’s conference call on September 10th they stated they are going to TRY to maintain a three business day turn time. In addition to entering the information in FHA Connect, an email must be sent to answers@hud.gov with the information below, along with the total number of units in the project. The branch will be ordering the FHA Case Number.
| 1.a. Mortgagee Information |
| Mortgagee Name: VanDyk Mortgage Corporation |
FHAC Lender ID Number: |
| Street Address: |
| City: |
State: |
Zip Code: |
Phone Number: |
| Contact Name: |
Email Address: |
Fax Number: |
|
|
|
|
|
|
| 2.a. Condominium Project |
| Legal Name of Project: |
FHA Condo Approval ID Number: |
| Street Address: |
| City: |
State: |
Zip Code: |
|
|
|
|
PROCEDURES AND FEES: VanDyk Mortgage’s Condominium Department will obtain the documentation, perform the review and provide the Underwriting Decision. The fee for this will be $300. Please email condoapprovals@vandykmortgage.com and include the borrower name, loan number, and contact information for the HOA. A valid FHA Case Number must be assigned before placing the order with the Condo Department.
ADDITIONAL RESTRICTIONS FOR SINGLE UNIT APPROVALS: In addition to the Standard Program condominium guidelines, FHA’s restrictions for loans being approved under the Single Unit Approval Process include:
- Projects cannot be new construction. Control must have transferred and Certificate of Occupancy must be over one year old.
- Projects cannot have had financial distress in the last three years
- Projects must contain more than 4 units. Two to four unit projects are not eligible.
- Manufactured homes are not eligible for Single Unit approval.
- Projects cannot have commercial space exceeding 35%. (there are exceptions under their Standard program).
- Project cannot contain any “Ineligible” Characteristics noted below:
Ineligible Characteristics
FHA will not approve Condominium Projects with the following characteristics:
- cooperative ownership;
- condominium hotel or condotel;
- mandatory rental pooling agreements that require Unit owners to either rent their Units or give a management firm control over the occupancy of the Units;
- timeshare or segmented ownership projects;
- multi-dwelling condominiums (more than one dwelling per Condominium Unit);
- houseboat project;
- continuing care facility;
- Coastal Barrier Resources System location; or
- Subject to adverse determination for significant issues as identified by FHA.
AUS ACCEPT: TOTAL Mortgage Scorecard must be an Accept, or the loan must have a maximum LTV of 90 percent.
FANNIE V/S FHA: For those familiar with FannieMae Full reviews, this new Single Unit Approval Process is similar, but more stringent, and can only be used for approval of one unit. Below are some items that are more restrictive than Fannie/Freddie. For complete guidelines, please refer to the 4000.1 Single Unit guidelines attached.
Financials that are more restrictive than Fannie/Freddie:
- Reserves must be at least 10% of the total assessments without any adjustments. Adjustments allowed by Fannie/Freddie such as pass through utilities, reserves, loan payments etc. are not allowed.
- Evaluation of a balance sheet and expense statement dated in the last 90 days and previous year-end financials is required.
- Project must show operating income that demonstrates a stable income stream over the past two years with decreases of no higher than 15%.
- Ability to cover the cost of insurance coverage and deductibles must be proven.
- Financial control requires the management company must have approval from the Condo Association to draft checks on, or transfer funds from the reserve account. (NOTE: This requirement will make a significant number of projects ineligible)
- If the project contains commercial space, the project must have clearly defined separate income and expense streams. The commercial space must be financially independent from residential. The same financial information required for the residential units must be obtained for the commercial units.
Insurance requirements that are more restrictive than Fannie/Freddie:
- Projects with a Coinsurance clause are not eligible unless there is an agreed amount endorsement or selection of a the agreed value option (which basically negates coinsurance). Fannie/Freddie will allow if we document the coverage meets the cost to reconstruct.
- Fidelity Insurance coverage must be at a minimum the three months of dues PLUS the amount in the reserve account. Fannie/Freddie allow 3 months dues if financial controls are in place.
- Flood insurance must be under the NFIP. Private coverage is allowed by Fannie/Freddie.
In addition to documenting satisfactory flood insurance coverage, a flood elevation certificate must be obtained that shows the lowest floor, including the basement of the residential building(s), and all related improvements/equipment essential to the value of the property is built at or above the 100-year flood elevation in compliance with NFIP criteria. Fannie/Freddie have no such requirements.
